TaxTMI 
TaxTMI 
2026 (5) TMI 538
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....ugned order has been assailed on the following grounds of appeal before us: 1. Whether on the facts and circumstances of the ease and in law, the CIT(A) is justified in rejecting the benchmarking analysis carried out by the TPO? 2. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) is justified in directing the IPO 10 exclude "EClerx Services Lid' from the final list of comparables stating that this company is into the nature of KPO when this company is functionally similar to the operational profile of the assessee? 3. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) is justified in directing the TPO to exclude Infosys B PO Ltd from the final list of comparables due to huge turnover when this company is functionally similar to the operational profile of the assessee? 4. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) is justified in directing the TPO to exclude Infosys B PO Lid from the final list of comparables due to huge turnover without appreciating the fact that in service sector, especially in software industry there is no linkage between the tum over....
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....2. Succinctly stated, the assessee company which is engaged in the business of Market Research and Data Processing had e-filed its return of income for the AY 2014-15 on 24/11/2014, declaring an income of Rs. 45,75,17,450/-. Subsequently, the case of the assessee company was selected for scrutiny assessment and notice under section 143(2) of the Act was issued. 3. The AO vide his order passed under section 143(3) r.w.s 92CA(4) r.w.s 144C of the Act, dated 29/01/2018 assessed the income of the assessee company at Rs. 76,32,86,548/- made two additions based on the calculation of the Arm's Length Price (ALP) of the international transactions of the assessee company with its Associated Enterprises (AEs) based on the adjustments advised by the Transfer Pricing Officer (TPO) vide his order, dated 31/10/2017 passed under section 92CA(3) of the Act: Rs. 22,66,45,137/-. 4. Aggrieved, the assessee company carried the matter in appeal before the CIT(A) who partly allowed the same with a direction to the TPO to recompute the ALP based on his observations, viz., (i) to exclude EClerx Services Limited, i.e., the comparable selected by the TPO in the course of the TP proceedings; (ii) to ex....
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....he credit period to be allowed for computing the interest on the outstanding receivables from the Associated Enterprises, the Ld. CIT-DR submitted that the TPO has rightly allowed 60 days credit period for computing the same. The Ld. CIT-DR to buttress his contention had relied upon the order of the Tribunal in the case of DGS Technical Services Private Limited vs. DCIT, Circle-8(1), Hyderabad in ITA No.1095/Hyd/2024, dated 31/10/2025, wherein it was observed that the TPO had rightly allowed 60 days credit period for computing the interest on the outstanding receivables. 9. Per contra, Ms. Ananya Kapoor, Advocate, Learned Authorized Representative (for short, "Ld. AR") for the assessee company, at the threshold of hearing of the appeal, submitted that the grounds of appeal No.2 to 6 are squarely covered by the order passed by the Tribunal in the assessee's own case for the preceding years. Elaborating on her contention, the Ld. AR submitted that the Tribunal had consistently in the assessee's own case for the AY 2008-09 to AY 2011-12 directed the exclusion of both the subject companies which had been included by the TPO in the course of the benchmarking analysis from the final l....
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.... its Associated Enterprises by adopting LIBOR+200 basis points as against the notional interest adopted by the AO/TPO using SBI Term Deposit rate of 7.5% on the closing balance of outstanding receivables. Apart from that, the Ld. AR submitted that the CIT(A) by relying upon the orders passed by the Tribunal in the case of M/s. OSI Systems Pvt Ltd vs. DCIT-16(2), Hyderabad in ITA No.2228/HYd/2017, wherein similar facts were involved had rightly allowed 120 days of credit period for computing the interest on the outstanding receivables from the Associated Enterprises. 11. We have heard the Learned Authorized Representatives of both parties, perused the orders of the authorities below and the material available on record. 12. Apropos the selection of the aforementioned two comparables by the TPO for benchmarking the international transactions of the assessee company, we find substance in the Ld. AR's contention that as the CIT(A) had followed the view taken by the Tribunal in the assessee's own case ITA No. 407/Hyd/2015, for AY 2010-11 and ITA No.604/Hyd/2014, for AY 2009-10, therefore, considering the fact that there has been no functional shift of either the assessee company o....
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....the Tribunal in the assessee's own case for the preceding years had been excluded from the final list of comparables. We thus, finding no substance in the aforesaid contention of the Ld. CIT-DR are unable to persuade ourselves to subscribe to the same. 14. Apropos the computing of the interest on the outstanding receivables of the AE, we find that the said issue is squarely covered in the assessee's own case for AY 2013-14, ITA No.2261/Hyd/2017, dated 03/06/2024, wherein the Tribunal after relying on certain judicial pronouncements, had observed that for the purpose of benchmarking the interest receivables on outstanding receivables from AE, LIBOR+200 basis points is the appropriate rate of interest to be considered by the AO. We thus, finding no reason to take a contrary view, respectfully follow the aforesaid order of the Tribunal and concur with the CIT(A), who had rightly directed the AO to adopt LIBOR+200 basis points as the appropriate rate of interest in place of notional interest imputed by the TPO using SBI Term Deposits rate of 7.5% on the closing balance of outstanding receivables as on 31/03/2014. 15. Coming to the issue of allowing of the credit period of 120 day....
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....owever, had not challenged the period of credit as taken by the TPO in the course of determining the ALP of the said transactions, thus, it can safely be inferred that the said period of credit had been accepted by the assessee company. Accordingly, the AO/TPO is directed to take the credit period as was adopted by the TPO in the case of the assessee company for AY 2013-14. 16. Before parting, we may herein observe that the Ld. AR had come up with an alternative contention regarding the credit period to be adopted in the case of the assessee company by drawing support from section 92CE r.w. Rule 10CB of the IT Rules, 1962. The Ld. AR submitted that section 92CE(2) of the Act contemplates that, where as a result of a primary adjustment of the transfer price, there is an increase in the total income or reduction in the loss, as the case may be of the assessee, then the excess money which is available with AE, shall be deemed to be an advance made by the assessee to such AE and the interest on such advance, shall be computed in such manner as may be prescribed. The Ld. AR submitted that Rule 10CB(1) further contemplates that for the purposes of sub-section (2) of section 92CE of th....